Nov. 20 (Bloomberg) -- Gold’s 12-year rally, the longest in
at least nine decades, is poised to continue in 2013 as central
bank stimulus spurs investors from John Paulson to George Soros
to accumulate the highest combined bullion holdings ever.

The metal will rise every quarter next year and average
$1,925 an ounce in the final three months, or 11 percent more
than now, according to the median of 16 analyst estimates
compiled by Bloomberg. Paulson & Co. has a $3.66 billion bet
through the SPDR Gold Trust, the biggest gold-backed exchange-traded product, and Soros Fund Management LLC increased its
holdings by 49 percent in the third quarter, U.S. Securities and
Exchange Commission filings show.

Central banks from Europe to China are pledging more steps
to boost growth, raising concern about inflation and currency
devaluation. Investors bought 247.5 metric tons through ETPs
this year, exceeding annual U.S. mine output. While both sides
said talks Nov. 16 between President Barack Obama and Congress
over the so-called fiscal cliff were “constructive,” the
Congressional Budget Office has warned the U.S. risks a
recession if spending cuts and tax rises aren’t resolved.

“We see gold as a hedge against the follies of
politicians,” said Michael Mullaney, who helps manage $9.5
billion of assets as chief investment officer at Fiduciary Trust
in Boston. “It’s a good time to garner some protection in
portfolios by having some real asset like gold.”

Longest Streak

Gold advanced 11 percent to $1,728.85 in London this year,
headed for a 12th consecutive annual gain, the longest streak in
data compiled by Bloomberg going back to 1920. Prices reached a
record $1,921.15 in September 2011. The Standard & Poor’s GSCI
gauge of 24 commodities slipped 0.3 percent and the MSCI All-Country World Index of equities climbed 8.2 percent. Treasuries
returned 2.7 percent, a Bank of America Corp. index shows.

Bullion held through ETPs, the first of which listed in
2003, reached a record 2,604.2 tons yesterday, valued at $144.9
billion. That exceeds the official reserves of every nation
except the U.S. and Germany, World Gold Council data show. The
SPDR Gold Trust alone holds 1,342.2 tons.

Soros increased his investment in the trust to 1.32 million
shares in the third quarter, the most since 2010, a Nov. 14 SEC
filing showed. The stake, with each share representing about a
10th of an ounce, is valued at $221.4 million. Prices advanced
60 percent since January 2010, when Soros called gold the
“ultimate asset bubble.” Michael Vachon, a spokesman for the
82-year-old who made $1 billion breaking the Bank of England’s
defense of the pound in 1992, declined to comment.

Official Reserves

Paulson, who became a billionaire in 2007 by wagering
against the subprime mortgage market, owns 21.8 million shares
in the SPDR Gold Trust, making him the biggest shareholder, a
Nov. 15 SEC filing showed. The 56-year-old raised his stake by
26 percent in the second quarter and his holding of about 66
tons exceeds the official reserves of nations from Brazil to
Bulgaria to Bolivia.

The New York-based hedge fund company reduced its
investments in Anglogold Ashanti Ltd. and Gold Fields Ltd., the
third- and fourth-biggest producers. Armel Leslie of Walek &
Associates, a spokesman for Paulson’s fund, declined to comment.

Paul Touradji’s Touradji Capital Management LP sold all of
its 82,000 shares in the SPDR Gold Trust in the third quarter,
according to an SEC filing. Lone Pine Capital LLC, the hedge
fund run by Stephen Mandel Jr., cut its stake by 31 percent to
2.6 million shares, and Dan Loeb’s Third Point LLC lowered its
bet by 10 percent to 130,000 shares, filings showed last week.
Officials from all three companies declined to comment.

Nine Strategists

While some investors expect stimulus to devalue currencies,
the median of nine strategist estimates compiled by Bloomberg
show the U.S. Dollar Index, a measure against six major trading
partners, will average 82.8 next year, from 80.9 now. Steven
Englander, Citigroup Inc.’s head of G-10 strategy, said in an
interview this month that the currency market is signaling it
isn’t yet convinced the Federal Reserve will fulfill its pledge
to pump record amounts of cash into the economy through 2015.

Third-quarter demand for gold fell 11 percent, the most
since 2009, as China’s slowing growth curbed purchases, the
London-based World Gold Council said Nov. 15. India, the biggest
buyer in the quarter, consumed 24 percent less in the year’s
first nine months as bullion priced in rupees reached a record
in September. The Washington-based International Monetary Fund
cut its 2013 forecast for world growth twice since July, to 3.6
percent.

Inflation Adjusted

While prices rose 25 percent since November 2010, the size
of the futures market, based on contracts outstanding, fell 30
percent, bourse data show. The metal, down 3.7 percent from this
year’s high, has yet to exceed previous records when adjusted
for inflation, with its 1980 record of $850 equal to $2,398
today, data compiled by the Fed Bank of Minneapolis show.

Hedge funds and other large speculators pared bets on a
rally in futures traded on the Comex bourse in New York by 29
percent since Oct. 9, U.S. Commodity Futures Trading Commission
data show. They’re still holding a net-long position of 140,162
futures and options, about 10 percent more than this year’s
average, and increased wagers by 7.7 percent last week.

The Fed said Oct. 24 it will maintain $40 billion in
monthly purchases of mortgage debt and probably hold interest
rates near zero until mid-2015. The European Central Bank said
it’s ready to buy bonds of indebted nations and the Bank of
Japan raised its asset-purchase program for the second time in
two months on Oct. 30.

Quantitative Easing

Gold rallied 70 percent as the Fed bought $2.3 trillion of
debt in two rounds of quantitative easing from December 2008
through June 2011.

Investors buying bullion as a hedge against inflation and a
weaker dollar generally earn returns only through price gains,
increasing its allure as interest rates decline. It rose sixfold
since the end of 2000, beating the 34 percent advance in the S&P
500, with dividends reinvested, and the 91 percent return on
Treasuries. The Dollar Index fell 26 percent.

The first face-to-face meeting between Obama and leaders
from Congress on the fiscal cliff yielded optimism and few
details about how it would be resolved. The $607 billion of
automatic spending cuts and tax increases is scheduled to take
effect in January. U.S. equities and Treasuries rose Nov. 16 and
gold futures were little changed.

Options Trading

Credit Suisse Group AG’s Tom Kendall, the most accurate
gold forecaster tracked by Bloomberg over the past two years,
sees prices averaging $1,880 in the fourth quarter next year and
UniCredit SpA’s Jochen Hitzfeld, ranked second, expects $1,950.
Deutsche Bank AG’s Daniel Brebner, the next most accurate,
predicts $2,300 in the third quarter.

Options traders are also bullish, with the seven most
widely held contracts conferring the right to buy at prices from
$1,800 to $2,200 between November and March, Comex data show.

Central banks added to reserves for 19 consecutive months
through August, the longest streak since 1964, IMF data show.
Nations from Russia to South Korea to Mexico bought more to
bring combined holdings to 31,461 tons, equal to about 18
percent of all the metal ever mined.

Barrick Gold Corp., the world’s largest producer, will
report a 41 percent gain in profit to a record $5.04 billion
next year, the mean of 10 analyst estimates compiled by
Bloomberg shows. The Toronto-based company’s shares fell 25
percent this year and will gain 43 percent in the next 12
months, according to the average of 23 forecasts.

Monetary Stimulus

Analysts predict Newmont Mining Corp. and AngloGold
Ashanti, the next-biggest, will also report the most profit ever
next year.

“It looks as though global monetary stimulus is likely to
continue, particularly in the wake of growing fiscal
austerity,” said Alan Gayle, a senior strategist at RidgeWorth
Capital Management in Richmond, Virginia, which oversees about
$47 billion of assets. “That puts pressure on the monetary
authorities to stimulate the economy and that will debase the
currencies and put a bid under gold.”